Exterran to Spin Off International Unit

Exterran Holdings, Inc. is separating the company’s international contract operations, international aftermarket services and global fabrication businesses into a standalone, publicly traded company (SpinCo), resulting in two independent companies.

Upon completion of the transaction, Exterran Holdings (RemainCo) will be a pure-play U.S. compression services business. RemainCo will hold interests in Exterran Partners, L.P., which include the sole general partner interest and certain limited partner interests that together currently represent a 37 percent ownership interest in Exterran Partners, as well as all of the incentive distribution rights in Exterran Partners. In addition, RemainCo will own and operate the remaining U.S. contract operations and U.S. aftermarket services businesses currently owned by Exterran Holdings. The operations of Exterran Partners will not be affected by the transaction.

SpinCo’s businesses will consist of Exterran Holdings’ current international contract operations and aftermarket services businesses, with operations in Latin America and parts of the Eastern Hemisphere, and its global fabrication business.

Benefits of the Transaction

Exterran Holdings believes that there are significant benefits to the simplified, separate companies resulting from this transaction, including:

RemainCo:

Tailored Growth Strategies – exclusive focus on growing the U.S. services businesses, including organic growth, third party acquisitions and sales by RemainCo of additional U.S. contract operations assets over time to Exterran Partners;

Efficient Return of Capital to Shareholders – expect to return a high percentage of cash flow in the form of a dividend given the limited capital requirements and limited debt at the parent level;

Shareholder Alignment – appeals to investors looking for a pure-play yield investment with significant exposure to the U.S. energy infrastructure redevelopment; and

Valuation – expected to be valued on a dividend yield basis, consistent with other publicly traded general partners, unlocking value for shareholders.

SpinCo:

Tailored Growth Strategies – greater focus on profitable growth in strategic markets; poised to benefit from the continued build-out of global energy infrastructure and the redevelopment currently underway in North America;

Cash Flow Generation – stable cash flows from its international services businesses and limited capital expenditures in its fabrication business are expected to allow for cash flow generation to support a continued return of capital to shareholders in the form of a dividend;

Expanded Product Customer Base – the separation will enable SpinCo to expand its potential fabricated compressor sales customer base to include companies in the U.S. contract compression business that have historically been Exterran Holdings’ competitors;

Attractive Returns – investments in international contract operations projects typically are sold with attractive rates of return and favorable contract durations; and

Shareholder Alignment – appeals to investors interested in investing in the accelerating growth in the international and U.S. energy infrastructure build-out.

Financing and Capital Structure

SpinCo is expected to be distributed with an amount of long-term debt equivalent to the amount of long-term debt held at the Exterran Holdings parent level immediately prior to the transaction, and SpinCo will provide these borrowed funds to Exterran Holdings or its subsidiaries on or before closing. Exterran Holdings is expected to pay off its long-term debt at closing with those funds and, as a result, RemainCo is expected to have no leverage at the parent level immediately following the transaction. The structure of the transaction is not expected to impact Exterran Partners’ long-term debt, all of which is anticipated to remain in place immediately following the transaction. As of September 30, 2014, Exterran Holdings had $737.7 million of long-term debt outstanding at the parent level, and Exterran Partners had $1,220 million of long-term debt outstanding. SpinCo will also retain the rights to the receivables relating to the prior sales of Exterran Holdings’ assets in Venezuela. These receivables currently total approximately $159 million, due in quarterly installments over the next two years.

The transaction is expected to result in the technical termination of Exterran Partners on the date of the transaction for U.S. federal income tax purposes. The technical termination will not affect Exterran Partners’ classification as a partnership or otherwise affect the nature or extent of its “qualifying income” for U.S. federal income tax purposes. Exterran Partners’ taxable year for all unitholders during the year the transaction is consummated is expected to end on the date of the transaction and may result in a deferral of depreciation deductions that would otherwise be allowable in computing the taxable income of Exterran Partners’ unitholders. It is expected that any deferral of depreciation deductions could result in increased taxable income to certain unitholders in the year the transaction is consummated.

Dividend Policy

Exterran Holdings’ current dividend is $0.15 per share of common stock on a quarterly basis, a rate of $0.60 per share on an annualized basis. The dividend policies for RemainCo and SpinCo will be evaluated and announced for each company prior to completion of the transaction.

Executive Management Teams and Boards of Directors

Upon completion of the transaction, RemainCo and SpinCo will each have its own independent executive management team and board of directors. The board of directors of Exterran Partners’ managing general partner, including its conflicts committee, is anticipated to remain in place, with potentially some change in management representation on the board of directors post-transaction. Exterran Holdings is in the process of identifying the individuals who will be appointed to serve as executive officers and directors of each company and will provide information regarding these individuals in the future.

Employees

Exterran Holdings does not expect the transaction will result in significant job reductions among its current workforce of approximately 10,000 employees. The company does not anticipate any significant changes to the benefits it offers employees.

Transaction Details and Next Steps

Under the planned spin-off transaction, Exterran Holdings shareholders will retain their current shares of Exterran Holdings stock and receive a pro-rata dividend of shares of stock in SpinCo. The actual number of SpinCo shares that will be distributed to Exterran Holdings shareholders will be determined prior to closing the transaction. Exterran Holdings expects to incur one-time charges related to the transaction, which will be quantified as the transaction progresses. The completion of the spin-off will be subject to market conditions, the receipt of an opinion of counsel as to the tax-free nature of the transaction, completion of a review by the U.S. Securities and Exchange Commission of a Form 10 to be filed by SpinCo, the execution of separation and intercompany agreements and final approval of the Exterran Holdings board of directors. The spin-off will not be subject to a shareholder vote. Exterran Holdings expects that the spin-off of SpinCo, if consummated, will take place during the second half of 2015. While Exterran Holdings is committed to the spin-off, there can be no assurance that any transaction will ultimately be consummated and there can be no assurance of the terms or timing of such transaction if it is consummated. Exterran Holdings may, at any time and for any reason until the proposed transaction is complete, abandon the separation or modify or change the terms of the spin-off.

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